In this article on 9/6 I laid out in pretty great length (at least by my standards) the bullish and bearish factors facing the market at the time. Since then, not a lot has changed. Other than maybe the stock market bullish trend possibly strengthing a bit:
The gist of the 9/6 article was this:
1. The major trend of the stock market was (and still is) bullish
2. There is a larger than average number of reasons why a significant decline in the stock market in the very near future should come as a surprise to no one.
3. The proper course of action (in my mind): stay with the bullish trend but locate the nearest exit “just in case.”
Since Then:
Figure 1 displays four major market averages. 3 of the 4 have broken out to even higher new all-time highs (the only one of these that has not so far is the Russell 2000 small cap index).
All four of these indexes are above their 200-day moving average and 3 of the 4 recently hit new all-time highs. This is essentially the very definition of a “bull market.” In fact, one of the worst actions an investor can take is to look at new all-time highs, pronounce “this is the top” and sell everything. It’s not that this approach can’t work out. It just seldom ever does. And it does take a certain degree of hubris as it is tantamount to “telling the market what it’s supposed to do.”
Figure 1 – Major Average pushing higher (Courtesy AIQ TradingExpert)
On the Cautionary Side
On the flipside, Figure 2 displays my 4 market “bellwethers”. Recently, all 4 were flashing a warning signal. Late last week however, the electronics sector (represented here by ticker SMH) broke out to a new high so can not presently be categorized as “bearish.”
Figure 2 – Market Bellwethers (Courtesy AIQ TradingExpert)
A close eye should currently be kept on the Dow Transports and ticker XIV. If these continue higher and pierce their recent highs the stock market may well be “off to the races” again. If not, well, you get the idea.
I do suggest at least a quick re-perusal of the original article in order to note some of the potentially bearish developments that surround the market at the moment.
Summary
*I (sadly) do not possess the ability to predict what will happen next in the financial markets.
*I am (however) pretty good at identifying the trend “right now” (and right now – as suggested in Figure 1 above – the trend is still “bullish”).
*I am also pretty good at identifying times when risks are “above average” (and right now – as suggested in Figure 2 above and the previous article – those risks are “high”).
Bottom line:
1. Don’t fight the trend
2. Don’t fall in love with the trend
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
